From Bill Cobb: While listening to WJBO Radio on 9/15/08, I heard this discussion about this issue, which I didn’t know about. On the radio, callers were calling in complaining about this surprise “hurricane deductible” and how some of them couldn’t pay it. A representative from State Farm Insurance did call in to say that for State Farm, this policy change of adding this “Hurricane Deductible” took effect 10/15/2007 and requires a “minimum” hurricane deductible payment of 2% of your home’s value in order for the claim to be paid. This is a change resulting from Hurricanes Katrina and Rita and affects the Coastal States from Florida over to Texas. It was explained that this change is also in place so homeowner’s insurance can still be written in Louisiana and remain affordable. If your home is worth $300,000, then your storm damage claim would require you to pay State Farm a “minimum” of $6,000 toward the damage repair. Because 2% is the minimum, you may have to pay more than just 2%. In the case below, on a $449,000 home, the homeowner insured with Allstate must pay a 5% hurricane deductible or $21,000. This is much, much different than the typical $1,000 or $1,500 or $2,000 deductible we have been used to for decades now.

NOTE: THE WJBO RADIO SHOW MAINLY DEALT WITH THE 2 LARGEST HOMEOWNER’S INSURANCE INSURERS IN LOUISIANA, STATE FARM AND ALLSTATE. THIS POST ONLY STATES THE INSURANCE COMPANIES ALLSTATE AND STATE FARM, NOT SAFECO, HENRY INSURANCE, ETC.. I’VE BEEN TOLD THAT SAFECO STILL HAS THE $1,000 DEDUCTIBLE ONLY BY A LOCAL REALTOR AND REAL ESTATE INVESTOR. PERHAPS YOUR INSURANCE COMPANY HANDLES THIS IN A DIFFERENT MANNER. CHECK WITH THEM. AGAIN, I’M JUST REPORTING WHAT I HEARD ON THE RADIO AND IN THE NEWS.

*****The most important point stressed during this radio show by Matt Kennedy was to read the fine print every single time your insurance company sends you a notice……those were his words, not mine!*****

The local news channel, WAFB.com, reported on this late yesterday after the WJBO entire morning spent on hosting this issue:

“Two weeks after Hurricane Gustav hit Louisiana, many homeowners are getting eye-opening and jaw-dropping news. The deductibles they have to pay before their insurance company even steps in to pay for hurricane damage is far more than many ever expected.

It’s not $500 or even $2,000. In just one case, the amount is $21,000. That’s the reality facing one woman with major damage to her home. She has her homeowner’s insurance with Allstate.

Shannon Hyde’s home of three years was damaged when Gustav’s winds pushed a tree onto her house. She was inside with her kids at the time. She says the stumps left behind are a constant reminder of the day her son feared for his life. After Hyde and her family survived the storm, the next step was filing a claim with her insurance company.

She says because of some changes to her policy, it’s now a financial burden. Months ago, when Allstate added a hurricane deductible to her policy, she says she did not read the fine print. Hyde says her deductible is 5% of the value of her home, which amounts to $21,000. She says the damage is more than the deductible she’ll have to pay. She says she feels for those who cannot afford the new hurricane deductible.

Hyde says she’s still waiting for adjusters to give her rough figures on the total cost of her damages. Hurricane deductibles are based on a percentage of the value of the home as listed on the tax rolls, which in this case is $449,000. Many Allstate customers are now paying 5%, while State Farm has a statewide minimum of 2%.”

1 Response Was Important To Add Here From An Allstate Agent:

Hi Bill, I am an Allstate insured as well as a licensed insurance agent working for Allstate. I read this story and wanted to clarify a couple of things for you guys. Please understand that I am not fussing, or justifying the deductible, as I am an insured of Allstate as well. I do agree with the State farm agent who stated that the deductible was in place to ensure companies will remain writing homeowners insurance in Louisiana, however the fact that you have to read the fine print to know about the deductible is a bit exaggerated. I can not speak for any other company, but Allstate sent out SEPARATE letters -addressing ONLY the new hurricane deductible- 2 months before each insured’s policy renewed. Also, upon renewal, there was EXTRA documentation noting this change with their renewal policy which includes the declaration page which once again contained the information regarding this new deductible. It’s not a matter of “reading the fine print”, it’s a matter of these insured’s not taking responsibility for not reading the information sent to them, and in most cases not even opening the mail that was sent to them. Once again, I am not fussing at you, or anyone else, I just wanted to clarify this, because in my office alone we have handled just over 200 claims and this is what we have learned from them. Thank You

About Bill Cobb, Appraiser

The Baton Rouge Residential Appraisal Blog is an information source provided by local Home Appraiser, Bill Cobb, and Accurate Valuations Group. Bill has 24 years experience as a Baton Rouge Residential Home Appraiser and updates his local network of sites weekly with reports, videos and audio reviews of local housing market conditions! 225-293-1500